Geopolitical view: World Economic Forum & ECB Press Conference
Image credits: flickr /worldeconomicforum/24484759175
By Kenny Simon
It is no coincidence that the key point of discussion in this year’s Davos meeting was China’s economic slowdown and greater geopolitical risks around the globe. It’s been shown over the course of the new year that the current ripple effect and tumbling of Asian stocks especially, could be the byproduct of the market’s constant struggle to understand whether China was moving towards a free market economy or not. The subject of ‘communication’ popped up at the World Economic Forum today with most fingers pointed at Chinese policymakers, blaming them for having “communication issues” that are causing the current ‘global market panic’.
With China, the ultimate problem seemed to be the uncertainty. This involves not knowing exactly what the China’s policy really is whilst not having a clue on what exactly the renminbi is going to be valued against. Is it the dollar, is it a basket of currencies and which basket is it going to be? Additionally, on the matter regarding the balance of payment and the exchange rate, effective communication has been hinted once again by many to be one of the solutions that would certainly serve the issue.
From news revolving Asia particularly China, we now travel to Germany in order to have a sneak preview of Hot topics at the ECB Press Conference in Frankfurt. Firstly, ECB’s president Draghi did mention that ECB is carefully monitoring China and sees a gradual deceleration of growth in China. Is it a coincidence that ‘China’ seems to be the focal point of discussions in both key events and should we be looking at what correlations between that would exist between China’s economy and financial instruments?
Europe’s beleaguered stock markets climbed and the euro fell after European Central Bank President Mario Draghi mentioned the further expansion of the central bank’s stimulus efforts and maybe on the way.
“Draghi embraced and defended the ECB’s action but clearly and unequivocally opened the door wide for more action,” says Marc Chandler, global head of currency strategy at Brown Brothers Harriman. “The ECB has a mandate. He is committed to it,
As soon as that was announced, the euro slipped to $1.08 (as seen in the chart below) once Mr. Draghi signaled additional action as early as March.